What happens to company assets, including data, in bankruptcy

When a company files for bankruptcy, what it owns becomes part of the bankruptcy estate, and who decides what happens to it changes. In Chapter 7, a trustee takes control and sells non-exempt assets to pay creditors. In Chapter 11, the company usually stays in control as debtor in possession, but sales outside the ordinary course of business need court approval. Company data is an asset like any other, with one special rule: customer personal information protected by your privacy policy can only be sold on the policy’s terms or with court approval after a consumer privacy ombudsman reviews it.

Who decides

	Chapter 7	Chapter 11
Control of assets	Trustee	Debtor in possession (usually existing management)
Ordinary-course use	Trustee, if operating briefly	Company, without separate approval
Sales outside the ordinary course	Trustee, with notice and court approval where required	Company, after notice and a hearing
Proceeds go to	Creditors, by priority	Creditors under the confirmed plan

The rule for customer personal information

Section 363(b)(1) of the Bankruptcy Code applies when a company’s privacy policy, in effect on the date the case was filed, prohibits transferring personally identifiable information to persons not affiliated with the company. In that case the trustee may not sell or lease that information unless:

• the sale is consistent with the policy, or
• the court approves it after notice and a hearing, after a consumer privacy ombudsman has been appointed.

Under section 332, the court orders the US trustee to appoint the ombudsman, who can appear at the hearing and give the court information on the privacy policy, the potential losses or gains of privacy to consumers, and alternatives that would reduce privacy risk.

This rule is about customer data collected under a privacy policy. Internal company records (staff email, project documents, tickets) raise different questions, mostly contractual and employment-related, and are still estate property.

What owners and managers should do

1. Keep the systems running. Records stored in Google Workspace, Microsoft 365 or Slack disappear on the vendor’s schedule if the subscriptions lapse. Tell your counsel which accounts hold what.
2. List the data assets alongside the physical ones: systems, years of history, customer and employee data, and the privacy policy that applied.
3. Do not sell, license or delete records after filing without your lawyer and, where required, the trustee or court.
4. Raise value early. De-identified company records can be licensed to AI developers. A trustee or debtor in possession can only consider it if someone points it out and the accounts still exist.

Outside bankruptcy

In an assignment for the benefit of creditors, the assignee sells the assets under state law and section 363 does not apply directly. Your privacy policy and customer contracts still do.